Updates from the National Labor Relations Board: The Proposed Joint-Employer Rule & Union Insignia

Two recent developments from the National Labor Relations Board (the “Board”) mark significant changes in Board precedent and reflect the shift in the Board’s political composition.

Proposed Rule Concerning the Joint-Employer Standard

On September 6, 2022, the NLRB released a Notice of Proposed Rulemaking (“NPRM”) concerning the joint-employer standard under the National Labor Relations Act (“NLRA”), which, if promulgated, could have a substantial effect on many employers’ operations.

The current rule, promulgated in February of 2020, established the standard that a joint-employer relationship exists only where a company exercises substantial direct and immediate control over the essential terms and conditions of another company’s employees. This was a direct rejection of the more expansive standard set forth in Browning-Ferris Industries of California, Inc., 362 NLRB No. 186 (2015), which found a joint-employer relationship where there was reserved joint control, indirect control, or control that was limited and routine.

The currently proposed rule would replace the current rule discussed above and return to the broader standard, perhaps even more expansive given that the list of terms and conditions identified is non-exhaustive. More specifically, two or more employers would be considered joint employers if they share or codetermine those matters governing employees’ essential terms and conditions of employment, such as wages, benefits and other compensation, work and scheduling, hiring and discharge, discipline, workplace health and safety, supervision, assignment, and work rules. When making this determination, the Board would consider both direct evidence of control and evidence of reserved and/or indirect control over the essential terms and conditions of employment.

Under the proposed rule, “share or codetermine” would mean “possess the authority to control (whether directly, indirectly, or both) or to exercise the power to control (whether directly, indirectly, or both) one or more of the employees’ essential terms and conditions of employment.” The proposed rule also notes that this control only needs to exist for a joint-employer relationship to be established. It does not have to be exercised. This detail is broader than the standard in Browning-Ferris, which did not explicitly allow for joint-employer status to be found solely on the existence of an unexercised right of control. However, the proposed rule does contemplate some limitations. For example, the Board notes that an employer's control over matters that are immaterial to the existence of an employment relationship under established common-law agency principles, or that otherwise do not bear on the employees' essential terms and conditions of employment, will not be relevant to the joint-employer inquiry. Matters such as routine components of a company-to-company contract (e.g., “very generalized cap on contract costs,” or an “advance description of the tasks to be performed under the contract”) or contractual terms “limited to dictating the results of a contracted service, that aim to control or protect [the employer's] own property, or set the objective, basic ground rules, and expectations for a third-party contractor” will generally not be material to this analysis. The Board is also seeking comments on which contractual controls reserved by an employer over another entity’s employees should establish a joint-employer relationship, so this landscape could change when the final rule is issued.

The proposed rule also defines the essential terms and conditions of employment to “generally include, but not [be] limited to: wages, benefits, and other compensation, hours of work and scheduling; hiring and discharge; discipline; workplace health and safety; supervision; assignment; and work rules and directions governing the manner, means, or methods of work performance.”  This is a much more inclusive definition of essential terms and conditions than previous ones. However, this definition may narrow as the Board notes that it aims to ensure that that this approach “is not needlessly overinclusive” and it “anticipates that comments will permit it to refine the list of essential terms and conditions of employment.”

Two Board members dissented from this proposed rule. Their main contention, among others, is that the proposed rule, without valid justification, expands the joint-employer standard beyond the outermost limits of the common law principles with which it purports to be aligned. Currently, the comment period for this rule is open and the public may file comments on the proposed rule on or before November 7, 2022.  Replies to comments filed during the initial comment period must be filed with the Board on or before November 21, 2022.  These comments will be reviewed by the Board and will be addressed in the final rule. The Firm will continue to monitor developments on this proposed rule and the eventual final rule.

All employers, regardless of whether their workforce is unionized or not, need to be mindful of this proposed change as it may impact agreements and/or relationships employers have with vendors and other entities whose workforces are unionized. As this proposed change may only require the unexercised right to control for a joint-employer relationship to exist, even employers who don’t have their own unionized workforce may find themselves subject to bargaining obligations with vendor unions, liable for unfair labor practices by vendor employers, and potential picketing depending on their relationships and contracts with vendors.

Decision Concerning the Wearing of Union Insignia

On August 29, 2022, the Board issued a decision in Tesla, Inc., 370 NLRB No. 131 (2022). In this case, Tesla prohibited production associates from wearing black cotton shirts with the union’s logo on it, but continued to allow them to wear union stickers on their required team wear. Tesla cited to their dress code policy, which requires workers to wear the assigned team wear or all black clothing if approved by a supervisor, as the justification for this ban. In response, the United Automobile Workers and NLRB prosecutors challenged this policy.

The Board found that Tesla violated Section 8(a)(1) of the NLRA by maintaining the team-wear policy which implicitly banned black union shirts without special circumstances justifying the prohibition. This decision restores the presumption that when an employer interferes with their employees’ protected right to display union insignia under Section 7 of the NLRA, that interference is unlawful absent special circumstances. The special circumstances analysis is applicable even when the employer permits its employees to display the union insignia in other ways. Further, the employer carries the burden of establishing special circumstances that make a rule interfering with displaying union insignia necessary to maintaining production or discipline. This decision overrules Wal-Mart Stores, Inc., 368 NLRB No. 146 (2019), which held that the special-circumstances test applies only when an employer completely prohibits union insignia, and that lesser size-and-appearance restrictions on union insignia can be deemed lawful based on less compelling employer interest.

The Board noted that an employer can establish special circumstances justifying restrictions on displaying a union insignia if that display may damage the employer’s products: for example, where a union pin could have caused defects in hosiery produced by the employer. However, the Board rejected Tesla’s argument of damage here, despite a manager’s testimony that a raised metal emblem on a shirt once damaged a vehicle, because the rule "goes far beyond simply prohibiting employees from wearing shirts with metal emblems" and there was no evidence that the shirts in question, cotton black shirts without metal emblems, could cause damage. The Board also rejected Tesla’s argument that special circumstances were established because these rules aided in the visual management of Tesla’s employees. This argument was rejected on the rationale that as the visual management of their employees was based on being able to identify all production associates by shirt color, wearing the union shirt did not impact that interest because it was the same color as the required black team wear shirt.  The Board also identified other special circumstances that may justify restrictions on union insignia and apparel such as “when their display may jeopardize employee safety, damage machinery or products, exacerbate employee dissension, or unreasonably interfere with a public image that the employer has established, or when necessary to maintain decorum and discipline among employees.”  However, none of those circumstances existed in this case.

Two Board members dissented on the grounds that the newly established rule is too strict for neutral dress code policies and, in effect, this rule prevents employers from maintaining any dress code that prohibits employees from substituting union apparel for required clothing unless the employer can demonstrate special circumstances.

Employer Takeaways

Employers should begin to assess any relationships they may have with other entities or vendors to ensure there is no direct and/or indirect authority to control one or more of their vendor’s employees’ essential terms and conditions of employment. If an employer thinks this type of relationship may exist under the proposed rule, they should work with counsel to discuss options and compliance. Employers should direct any questions they have about their relationship to an entity or vendor under this new standard to the Firm. Employers should review any dress code policies to ensure they do not interfere with the display of union insignia or that any limitations could fall under one of the exceptions noted above. Employers may want to consider including additional language in their dress code policy noting that it is not applicable to the display of union insignia and/or does not in any way limit or restrict the display of union insignia. Employers with questions about these laws should contact Caroline Secola at csecola@fglawllc.com or any attorney at the firm.

DISCLAIMER: This alert is provided to clients and friends of the firm for informational purposes only and the distribution of this alert is not intended to, and does not, establish an attorney-client relationship. This alert also does not provide or offer legal advice or opinions on any specific factual situations or matters. This communication may be considered Attorney Advertising. Prior results do not guarantee a similar outcome.